Labour productivity dipped 2.6 per cent last year, amid slower economic growth and continued high employment creation. According to the Manpower Ministry’s (MOM) Report on Wage Practices 2012 released yesterday, labour productivity had grown by 1.6 per cent per annum on average between 2002 and last year, exceeding the growth in real total wages of 1.5 per cent including employer Central Provident Fund contribution.

But despite labour productivity rising in the two preceding years — it rose by 1.3 per cent in 2011 and 11 per cent in 2010 — it has been shrinking by 0.4 per cent per annum in the last five years.

From 2007 to 2012, employment grew by 4.7 per cent compared to the real gross domestic product growth of 4.3 per cent, the report noted.

Labour Member of Parliament Zainal Sapari felt the dip in labour productivity was “not surprising, because in the past our productivity was actually driven by manpower supply”.

“As the Government has tightened the foreign labour supply, we do expect that firms in their transitional stage in adjusting to the reduced manpower will experience a decline in productivity,” he added.

CIMB Research’s Regional Economist Song Seng Wun felt that the productivity was “a function of the slower (economic) growth” witnessed last year. “Singapore’s businesses tend to be quite reluctant to lay off workers because it’s very hard to employ,” he said. “With unemployment rate in Singapore, both at resident level and overall level, at relative low and with the Government saying that they’re not making any U-turn on the foreign worker policy, businesses normally try to hang on to workforce hoping that by the time demand recovers, they have the workforce in place.”

Added Mr Song: “With overall demand for goods and services down, overall the pool of workers basically still is the same, or even growing, (so) overall productivity comes off.”

Moving forward, Mr Sapari felt that it would be important for firms to restructure themselves and “really look into adopting technology and improve their work processes to make best use of their existing manpower to improve productivity”.